Govt did not want to give one big package, many medium-size packages likely to be announced: PEA Sanyal

In a call hosted by Elara Capital on Wednesday, Sanyal said the government wants to direct more resources in the rebuilding phase. A spokesperson from Elara Capital refrained from commenting on the call.

In the fiscal response, he indicated that more measures will come. Sanyal said the government is preparing for the long haul and keeping the powder dry. "Most other countries have responded in a knee jerk fashion and have nearly exhausted their ammunition. Govt in India knows that we are in this for a long haul and hence more pronounced responses will be needed over next few months as the full scale of economic impact becomes visible," he added.

He indicated the packages will come "in reasonable time". "Within reasonable limits the government shall make allowances for the current fiscal situation. We got to be sure that the government doesn't spend all our ammunition at one go", he said.

He emphasized that India has taken a different approach to fight the covid pandemic and is mindful of the repercussions if the epidemic is not controlled.

"India is prioritising containment and hence has been proactive in announcing a stringent and an early lockdown. The Government believes that if the epidemic is not controlled then the repercussions will be very difficult to manage. Thanks to this approach, infection rate in India is much lower given our population," he added.

The focus is on a step by step by step approach in lifting the lockdown. Government is taking a calibrated approach, Sanyal said. "From 3rd May onwards, depending on the feedback, except for a few hotspots a significant part of the economy can be opened up. The evaluation will be done on the basis of the incoming data," he indicated.

On the government's policy approach, Sanyal said, "The government has taken a view that we need to hedge for the worst and accordingly take a gradual approach in responding to economic shock. As an immediate measure the government has made sure that the poorest and the most vulnerable get fed. Apart from monetary and fiscal response, structural reforms that improve the efficiency of businesses will be undertaken," he added.

On the best approach to lift the lockdown, Sanyal said that India has so far gone for a sectoral approach for gradual opening of the economy.

"Eventually India needs to take the geographical approach. There is no logic in keeping Sikkim shut when there are no cases there. In the near term, inter-state large scale movement of people will have to be controlled. There will have to be control over travel out of the country. But goods travel can be opened up completely", he added, flagging a geographical approach.

He said the government is preparing for the long haul. "Government's view is that the crisis will last longer than what most people assume. So the government is preparing for a long haul. There could be months before we get out of this. So steady and step by step approach is the key", he said.

Cheap capital is the key, Sanyal added that the government believes that it is important that the cost of capital is kept low. Hence there is more room for interest rates to fall and for transmission to improve. Both corporate and government are borrowing at high rates. India has more space on the monetary side than fiscal, the Principal Economic Adviser added.

He believes the post covid world will be a reset. "The post covid world will see a reset at different levels: social, economic, geopolitical, supply chain, technological among others. The Government of India realises this and hence wants to focus on measures that ensure that we see economic gains in the long run", he said, elaborating on a complete reset and how to capitalize on it.

India will attract the supply chain shift. "India wants to take all measures needed to attract supply chains that are likely to get reset in the post covid -economic order. Very important that Indian businesses remain in a risk-taking mode else India will not be able to take advantage of this global reset of order", he added.

The government will do everything in its capacity to ensure that businesses remain healthy especially in the MSME sector. The lower leverage of Indian businesses is proving to be a blessing in the current phase, he said.

India will play an important role in the post Covid world, Sanyal said and the government is already providing a huge leadership at multiple levels especially at the G-20. "Our response to health situations has been appreciated widely", he added.

He emphasized the need to "Think Big. Think Bold". Hinting at coming reforms, he said. "We need to boldly market our country to the entire world. We need to be able to re-think our tax laws, labour laws, legal system."

For instance, it takes over 40 days to deliver a cloth from Delhi to New York and 18 days of the 40 are taken in India itself. This is a glaring pain point that needs to be addressed. Industry needs to think big & demand big; not get tied up with miniscule matters, he added.

Just as India undertook measures to restrict Chinese FDI through automatic route, the government will be vigilant to dumping issues and respond in a timely manner, Sanyal said.

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